The Medicare Part D Prescription Drug Benefit Understanding the Formulary Requirements and Related Implications Michael Sharp, R.Ph, Pharmacy Consultant.

The Medicare The Medicare Part D Part D

Prescription Prescription Drug BenefitDrug BenefitUnderstanding the Formulary Understanding the Formulary

Requirements and Related Requirements and Related ImplicationsImplications

Michael Sharp, R.Ph, Pharmacy Consultant

Office of Medicaid Policy and Planning, State of Indiana

[email protected]

Areas of FocusAreas of Focus

Basic benefit principles, fundamental Basic benefit principles, fundamental formulary requirements and CMS formulary requirements and CMS review processesreview processes

Exceptions/Appeals overviewExceptions/Appeals overview Formulary implications for dual-Formulary implications for dual-

eligibles and the Indiana Medicaid eligibles and the Indiana Medicaid approachapproach

Implementation considerations, Implementation considerations, timeline and recommended resourcestimeline and recommended resources

Medicare CoveragesMedicare CoveragesPart Part AA

Hospital insuranceHospital insurance for inpatient for inpatient stays, some skilled nursing facility stays, some skilled nursing facility care, hospice care and home health care, hospice care and home health carecare

Part Part BB

Medical insuranceMedical insurance for physician for physician services, outpatient hospital care, services, outpatient hospital care, durable medical equipment, some durable medical equipment, some medical supplies and selected drugs medical supplies and selected drugs

Part Part CC

Medicare Advantage (MA-PD)Medicare Advantage (MA-PD) for for benefits through private health plans benefits through private health plans – old Medicare+Choice– old Medicare+Choice

Part Part DD

Prescription drug benefitPrescription drug benefit for persons for persons eligible for Part A or enrolled in Part eligible for Part A or enrolled in Part BB

Medicare Prescription Drug Benefit,Medicare Prescription Drug Benefit, 2006 and Beyond 2006 and Beyond

Beginning in 2006, beneficiaries have choice of:  Beginning in 2006, beneficiaries have choice of:    

Traditional Medicare, with access to private drug-only plans (PDPs) Traditional Medicare, with access to private drug-only plans (PDPs) Medicare Advantage (MA-PD) plans for Medicare benefits and Rx Medicare Advantage (MA-PD) plans for Medicare benefits and Rx

drugsdrugs

New plans provide “standard” prescription drug benefit or its New plans provide “standard” prescription drug benefit or its “actuarial equivalent”“actuarial equivalent” Plans have some flexibility to determine which drugs are covered Plans have some flexibility to determine which drugs are covered

and cost-sharing requirements, subject to certain constraintsand cost-sharing requirements, subject to certain constraints

Premium and cost-sharing subsidies for low-income beneficiaries Premium and cost-sharing subsidies for low-income beneficiaries with incomes up to 150% poverty and modest assetswith incomes up to 150% poverty and modest assets

Medicaid will no longer pay for Medicare D covered drugs after Medicaid will no longer pay for Medicare D covered drugs after December 31, 2005December 31, 2005

Medicare Prescription Medicare Prescription Drug PlansDrug Plans

Must offer basic drug benefitMust offer basic drug benefit Standard benefitStandard benefit

May offer supplemental benefitsMay offer supplemental benefits Alternative BenefitAlternative Benefit Enhanced benefitEnhanced benefit

Can be flexible in benefit designCan be flexible in benefit design May look different than standard benefitMay look different than standard benefit May have different co-pay or co-May have different co-pay or co-

insuranceinsurance Cannot change actuarial equivalenceCannot change actuarial equivalence

Part D Sponsors – Part D Sponsors – Risk-Bearing EntitiesRisk-Bearing Entities

Prescription Drug Plans (PDPs)Prescription Drug Plans (PDPs) Pharmacy Benefit ManagersPharmacy Benefit Managers

Private Insurance CompaniesPrivate Insurance Companies

Medicare Advantage-Prescription Drug (MA-Medicare Advantage-Prescription Drug (MA-PDs)PDs)

Must offer at least 1 option for Rx coverage Must offer at least 1 option for Rx coverage

May offer plans with no drug coverage for May offer plans with no drug coverage for beneficiaries who decline Part D coveragebeneficiaries who decline Part D coverage

May offer Special Needs Plans, focusing on May offer Special Needs Plans, focusing on Duals & selected diagnosesDuals & selected diagnoses

Formulary Coverage Formulary Coverage FundamentalsFundamentals

CMS says “clinically appropriate medications, at lowest CMS says “clinically appropriate medications, at lowest possible cost”possible cost”

Formularies must not discriminate against:Formularies must not discriminate against:

Individuals with HIV/AIDS, mental health and other Individuals with HIV/AIDS, mental health and other cognitive disorderscognitive disorders

The Dual eligiblesThe Dual eligibles

CMS utilizes the USP formulary classification model as CMS utilizes the USP formulary classification model as the minimum benchmark for formulary appropriateness the minimum benchmark for formulary appropriateness

USP model consists of 146 therapeutic classifications USP model consists of 146 therapeutic classifications and related pharmacologic categoriesand related pharmacologic categories

Plans must accommodate all medically necessary Plans must accommodate all medically necessary medications at all levels of caremedications at all levels of care

Medicare Prescription Medicare Prescription Covered DrugsCovered Drugs

Prescription drugs, biologicals and insulinPrescription drugs, biologicals and insulin Medical supplies associated with injection of Medical supplies associated with injection of

insulin (syringes/swabs/etc)insulin (syringes/swabs/etc) Cases where a drug is not FDA approved for an Cases where a drug is not FDA approved for an

indication but it has clinical literature to support indication but it has clinical literature to support its useits use

Vaccines not covered by Part BVaccines not covered by Part B Viagra, Levitra and CialisViagra, Levitra and Cialis Brand name and generic drugs will be included Brand name and generic drugs will be included

in each formulary*in each formulary**Less for generics or preferred Rx, more for *Less for generics or preferred Rx, more for

brands. Multi-source brand name products can brands. Multi-source brand name products can be excluded. be excluded.

Formulary RequirementsFormulary Requirements

Plan formulary must be developed by a Plan formulary must be developed by a Pharmacy and Therapeutics Committee Pharmacy and Therapeutics Committee

Formulary must include at least 2 drugs in Formulary must include at least 2 drugs in each therapeutic category and pharmacologic each therapeutic category and pharmacologic class of covered Part D drugs and in certain class of covered Part D drugs and in certain categories, must contain “all or substantially categories, must contain “all or substantially all” of the following medications:all” of the following medications:

• Antidepressants• Antipsychotics• Anticonvulsants

• Antiretrovirals• Antineoplastics• Immunosuppressants

Part D Drug ExclusionsPart D Drug Exclusions Drugs forDrugs for

Anorexia, weight loss, or weight gainAnorexia, weight loss, or weight gain FertilityFertility Cosmetic purposes or hair growthCosmetic purposes or hair growth Symptomatic relief of cough and coldsSymptomatic relief of cough and colds

Prescription vitamins and mineral productsPrescription vitamins and mineral products Except prenatal vitamins and fluoride preparationsExcept prenatal vitamins and fluoride preparations

Non-prescription (OTC) drugs*, with the exception of OTC Non-prescription (OTC) drugs*, with the exception of OTC insulininsulin

BarbituratesBarbiturates BenzodiazepinesBenzodiazepines Outpatient drugs for which the manufacturer seeks to require Outpatient drugs for which the manufacturer seeks to require

that associated tests or monitoring services be purchased that associated tests or monitoring services be purchased exclusively from the manufacturer or its designee as a condition exclusively from the manufacturer or its designee as a condition of saleof sale

*Plans may choose to pay for OTC products as an administrative *Plans may choose to pay for OTC products as an administrative cost, with the member not incurring a co-pay, these products do cost, with the member not incurring a co-pay, these products do not count towards formulary requirements.not count towards formulary requirements.

Part D Drug Exclusions Part D Drug Exclusions (cont)(cont) Part A PrescriptionsPart A Prescriptions

– – In skilled nursing homes – up to 100 day stayIn skilled nursing homes – up to 100 day stay

Related to the terminal illness for hospice patientsRelated to the terminal illness for hospice patients

Part B Outpatient DrugsPart B Outpatient Drugs Durable Medical Equipment Drugs (e.g., inhalation Durable Medical Equipment Drugs (e.g., inhalation

therapy, insulin w/pumps & some chemotherapeutics)therapy, insulin w/pumps & some chemotherapeutics)

Immunosuppressive DrugsImmunosuppressive Drugs

Hemophilia Clotting FactorsHemophilia Clotting Factors

Selected Oral Anti-Cancer DrugsSelected Oral Anti-Cancer Drugs

Selected Oral Anti-Emetic Drugs, up to 48 hrs after Selected Oral Anti-Emetic Drugs, up to 48 hrs after chemotherapy administrationchemotherapy administration

Erythropoietin for persons on dialysisErythropoietin for persons on dialysis

Intravenous Immune Globulin, provided in the homeIntravenous Immune Globulin, provided in the home

P&T Committee: P&T Committee: RequirementsRequirements

Membership includes the following:Membership includes the following: The majority are practicing physicians and The majority are practicing physicians and

pharmacists. pharmacists. Various clinical specialties that reflect the Various clinical specialties that reflect the

needs of the plan beneficiaries. needs of the plan beneficiaries. At least one practicing physician and At least one practicing physician and

pharmacist who are experts in the care of pharmacist who are experts in the care of the disabled or elderly.the disabled or elderly.

CMS provides extensive guidance on the CMS provides extensive guidance on the expectations surrounding the composition expectations surrounding the composition and activities of the P&T committeeand activities of the P&T committee

Formulary Review: Formulary Review: RationaleRationale

Medicare Modernization Act Medicare Modernization Act requires CMS to review formularies requires CMS to review formularies and related processes to ensure:and related processes to ensure: Beneficiaries have access to a broad Beneficiaries have access to a broad

range of medically appropriate drugs to range of medically appropriate drugs to treat all disease states, andtreat all disease states, and

Formulary design does not discriminate Formulary design does not discriminate or substantially discourage enrollment or substantially discourage enrollment of certain groupsof certain groups

Formulary Review: CMS Formulary Review: CMS ValidationsValidations

Checks for appropriate utilization Checks for appropriate utilization management strategiesmanagement strategies

Checks for two drugs per USP category Checks for two drugs per USP category and classand class

Checks for Key Drug Types as defined by Checks for Key Drug Types as defined by USPUSP

Checks for the most common drugs used in Checks for the most common drugs used in the LTC populationthe LTC population

Checks “all or substantially all” Checks “all or substantially all” requirementrequirement

Formulary Formulary ConsiderationsConsiderations

Safety and EfficacySafety and Efficacy Cost-effectiveness*Cost-effectiveness* In general, formulary design will be In general, formulary design will be

similar to that of commercial plans similar to that of commercial plans today, with the added benefit of CMS today, with the added benefit of CMS oversight for adherence to published oversight for adherence to published guidelines.guidelines.

*The federal government can’t negotiate or *The federal government can’t negotiate or mandate pharmacy payment rates or mandate pharmacy payment rates or manufacturer rebate levelsmanufacturer rebate levels

Provision of Notice Provision of Notice Regarding Formulary Regarding Formulary

ChangesChanges Prior to removing/changing drug from Prior to removing/changing drug from

formulary the plan must:formulary the plan must: Provide 60 days notice to prescribers, Provide 60 days notice to prescribers,

network pharmacies, pharmacists and other network pharmacies, pharmacists and other health planshealth plans

CMS will review and approve modificationsCMS will review and approve modifications For enrollees, must provide either:For enrollees, must provide either:

Direct written notice at least 60 days prior to Direct written notice at least 60 days prior to date the change becomes effective, ordate the change becomes effective, or

At the time a refill is requested, provide a 60 day At the time a refill is requested, provide a 60 day supply of drug and written noticesupply of drug and written notice

Exception RequestsException RequestsEnrollees or their authorized representative may Enrollees or their authorized representative may

request an exception when:request an exception when: A non-formulary drug is prescribed and is A non-formulary drug is prescribed and is

medically necessarymedically necessary The cost-sharing status of a drug an enrollee The cost-sharing status of a drug an enrollee

is using changesis using changes A drug covered under a more expensive cost-A drug covered under a more expensive cost-

sharing tier is prescribed because the drug sharing tier is prescribed because the drug covered under the less expensive cost-covered under the less expensive cost-sharing tier is medically inappropriatesharing tier is medically inappropriate

The enrollee is using a drug that has been The enrollee is using a drug that has been removed from the formularyremoved from the formulary

Ensures access to medically necessary Ensures access to medically necessary Medicare D covered prescription drugsMedicare D covered prescription drugs

Cost and Utilization Cost and Utilization ControlsControls

Prior AuthorizationPrior Authorization

Step TherapyStep Therapy

Quantity LimitsQuantity Limits

Frequency LimitsFrequency Limits

Generic SubstitutionGeneric Substitution

Drug Utilization Review-Prospective and Drug Utilization Review-Prospective and RetrospectiveRetrospective

Tiered formulary designTiered formulary design

Appeal ProcessesAppeal Processes 11stst Step: Plan Re-determination Step: Plan Re-determination

7 days to respond 7 days to respond 72 hours, if expedited72 hours, if expedited

22ndnd Step: IRE Reconsideration Step: IRE Reconsideration Independent Review Entity (IRE), CMS contractor, Independent Review Entity (IRE), CMS contractor,

which reviews plan redeterminationswhich reviews plan redeterminations 7 days to respond7 days to respond 72 hours, if expedited72 hours, if expedited

33rdrd Step: Administrative Law Judge Step: Administrative Law Judge Must satisfy minimum amount requirement Must satisfy minimum amount requirement

44thth Step – Medicare Appeals Council Step – Medicare Appeals Council

55thth Step – Federal District Court Step – Federal District Court

39%

31%

29%

24%

23%

18%

14%

6%

Characteristics of Medicare Population

Percentage of Total Medicare Population

Nursing Home/Assisted Living Resident

Under Age 65 & Disabled

Dual Eligible

Cognitive Impairment

Rural

Fair to Poor Health

1+ Functional Limitation

Low-Income < 150% FPL Excludes Part A only beneficiaries

Sources: Kaiser Family Foundation based on Medicare Current Beneficiary Survey, 1997-2002 and Low income estimate from CBO, July 2004

Issues for the DualsIssues for the DualsWhat happens, when they …What happens, when they …

Ignore notices regarding Rx changes Ignore notices regarding Rx changes Don’t know how to use their assigned planDon’t know how to use their assigned plan Learn the drug Medicaid paid for isn’t Learn the drug Medicaid paid for isn’t

covered by their new Medicare plancovered by their new Medicare plan Have higher out of pocket costs for copays, Have higher out of pocket costs for copays,

non - covered drugsnon - covered drugs

Formularies – Formularies – Transition ProcessTransition Process

Drug plans that want to serve Medicare beneficiaries enrolling in the new prescription drug benefit next year must meet strict standards to assure that older and disabled Americans will be able to make the transition to the new coverage smoothly.

Mark B. McClellan, March 16, 2005, CMS Press Release

• Plans have flexibility, but CMS guidance expects:

– 1-time transition supply for new enrollees

Ambulatory 30 days Nursing Home 90 to 180 days

– 1-time temporary emergency supply for othersFor changes in level of care (nursing home, acute hospital, hospital, etc.) or during appeals

Indiana Medicaid: Indiana Medicaid: Specific Approach for Specific Approach for

Dual EligiblesDual Eligibles Indiana Medicaid will continue to cover Indiana Medicaid will continue to cover

Medicare D excluded drugs to the extent that Medicare D excluded drugs to the extent that they are covered in the Medicaid program they are covered in the Medicaid program today. Current dual population estimated at today. Current dual population estimated at 100,000 lives. 100,000 lives.

Examples: Examples: Over the counter drugs on the Indiana Over the counter drugs on the Indiana

Medicaid formularyMedicaid formulary Agents for treating symptoms of cough/colds Agents for treating symptoms of cough/colds

and prescription vitaminsand prescription vitamins Barbiturates and benzodiazepinesBarbiturates and benzodiazepines

“ “You choose a prescription drug You choose a prescription drug plan and pay a monthly $35 plan and pay a monthly $35 premium. Okay, now it gets a premium. Okay, now it gets a little complex…” little complex…”

- - Reader’s DigestReader’s Digest, April 2004 , April 2004

Everyone Agrees: Everyone Agrees: It’s Difficult to It’s Difficult to

Comprehend all the Comprehend all the DetailsDetails

Do Not Enroll in Part D Plan

No Rx Coverage (late enrollment

penalty)

“Creditable”Employer Plan(no low-income

subsidies)

Medigap Coverage(but not “creditable”

= late enrollment penalty)

Enroll in Part D Plan

Medicare Advantage

•HMO

•PPO (regional)

•Private Fee-for-Service

Traditional Medicare

•Prescription Drug-Only Plan (PDP)

Decisions to be Made:• Premiums• Covered Drugs• Cost-Sharing

Apply for Low-Income Subsidy

If Dual EligibleAuto-Enrolled

Social Security

Medicaid

If meet income and asset test, qualify for subsidy:

Below 100% FPL ($9,570 in 2005)

Below 135% FPL ($12,920 in 2005)

Assets $6,000/single; $9,000/couple

Below 150% FPL ($14,355 in 2005) Assets $10,000/single;

$20,000/couple

Medicare Beneficiary

Decisions for Medicare Beneficiaries

Source: www.kff.org

26

“ “ Unfortunately, you have Unfortunately, you have what we call ‘no insurance.’ ”what we call ‘no insurance.’ ”

Issues for Practicing Issues for Practicing PhysiciansPhysicians

Assisting beneficiaries with understanding Assisting beneficiaries with understanding the new coverage availablethe new coverage available

Motivating patients to take action and apply Motivating patients to take action and apply for the benefit that comes closest to meeting for the benefit that comes closest to meeting their needstheir needs

Navigating multiple drug formulariesNavigating multiple drug formularies

Coordinating prior authorizations & appealsCoordinating prior authorizations & appeals

Comprehending the ongoing changes that Comprehending the ongoing changes that will likely occurwill likely occur

Medicare PrescriptionMedicare PrescriptionDrug Benefit Positive Effects Drug Benefit Positive Effects

Enhancement of existing Medicare benefit Enhancement of existing Medicare benefit packagepackage

Access to subsidized prescription drug Access to subsidized prescription drug coveragecoverage

Improved availability and compliance with Improved availability and compliance with treatment regimenstreatment regimens

Improved health and reduction of adverse Improved health and reduction of adverse health effectshealth effects

January 21, 2005 - Final Rule PublishedJanuary 21, 2005 - Final Rule Published June 6 - Bid submissionJune 6 - Bid submission July - Finalization pharmacy contractsJuly - Finalization pharmacy contracts September 14 - PDPs announcedSeptember 14 - PDPs announced October 1 - Marketing beginsOctober 1 - Marketing begins October 13 - Prescription Drug Plan Finder Tool October 13 - Prescription Drug Plan Finder Tool

rolloutrollout November 15 - Enrollment beginsNovember 15 - Enrollment begins January 1, 2006 - Benefit beginsJanuary 1, 2006 - Benefit begins May 15, 2006 – Last day to enroll before late May 15, 2006 – Last day to enroll before late

enrollment penaltyenrollment penalty

Medicare Prescription Medicare Prescription Drug Benefit TimelineDrug Benefit Timeline

Sources of InformationSources of Information CMS WebsiteCMS Website

www.cms.hhs.gov/medicarereform/pdbmawww.cms.hhs.gov/medicarereform/pdbma www.hhs.gov/medlearn/drugcoverage.aspwww.hhs.gov/medlearn/drugcoverage.asp

www.cms.hhs.gov/medicarereform/factsheets.aspwww.cms.hhs.gov/medicarereform/factsheets.asp

www.cms.hhs.gov/medicarereform/drugcoveragefaqs.aspwww.cms.hhs.gov/medicarereform/drugcoveragefaqs.asp

www.cms.hhs.gov/partnerships/news/mma/default.aspwww.cms.hhs.gov/partnerships/news/mma/default.asp

www.cms.hhs.gov/mailinglistwww.cms.hhs.gov/mailinglist

www.cms.hhs.gov/providerswww.cms.hhs.gov/providers

http://www.cms.hhs.gov/medlearn/drugcoverage.asp#trainhttp://www.cms.hhs.gov/medlearn/drugcoverage.asp#train

1-800-Medicare1-800-Medicare

Social Security AdministrationSocial Security Administration www.ssa.gov [Look under Medicare Outreach]www.ssa.gov [Look under Medicare Outreach]

Kaiser Family FoundationKaiser Family Foundation www.kff.org/rxdrugs/index.cfmwww.kff.org/rxdrugs/index.cfm

United States Pharmacopoeia (USP)United States Pharmacopoeia (USP) www.usp.org/HealthcareInfo/mmg/www.usp.org/HealthcareInfo/mmg/